Royal Crown Kicks Up A Fuss While Shasta Remains Silent

June 23, 1986|By Sal Vittolino, Assistant Business Editor

While one independent soda company has been raising a ruckus to anyone who will listen over the prospect of being buried by the big boys, hardly a peep has been heard from another pop maker that would become similarly obscure.

Both Royal Crown Cola Co. and Shasta Beverages have strong South Florida connections by virtue of their principals. But while Royal Crown took out full-page advertisements in seven newspapers on June 12 protesting the proposed acquisitions of Seven-Up by Pepsi Cola and Dr Pepper by Coca Cola, Shasta has seemingly been silent, on more than one front.

Last Friday, the Federal Trade Commission decided to go to court to prevent the buyouts -- a day after Royal Crown filed suit in U.S. District Court in Columbus, Ga., seeking to stop the $380 million purchase of Seven Up and $470 million buyout of Dr Pepper. The FTC said it feared the takeovers would reduce competition in the distribution and sale of soft drinks in the United States.

Shasta -- which was purchased in November by Burnup & Sims, the Plantation-based diversified telecommunications company, and was made a wholly owned subsidiary of the National Beverage Corp. -- had been scheduled to choose a new advertising agency in May, according to ADWEEK magazine. Seven agencies were bidding for the $3 to $5 million account formerly handled by Needham Harper Worldwide of Chicago, the magazine reported.

Michael Goldwire, National Beverage vice president, said he didn`t know where ADWEEK got its information. He said the company has postponed for 90 days a decision on choosing an ad agency until it first hires a ``top marketing executive.`` Goldwire refused to comment on the figure given by the advertising magazine regarding the size of the company`s ad budget.

Also, Goldwire said no decision has yet been made on whether to move the company to South Florida. ``You`ll be the first to know,`` he said.

The only recent news coming out of National Beverage, announced today, was that it had purchased 5.2 million shares in Burnup & Sims for $31.2 million, or $6 per share.

Royal Crown, of Rolling Meadows, Ill., ran its advertisements under the heading ``The Cola Wars and You`` warning that the acquisitions would result in soda price increases. ``Coke and Pepsi products would dominate the supermarket shelves, limiting or eliminating the display of competitive products and greatly reducing the choice of brands for consumers,`` said the ads, signed by James W. Harralson, Royal Crown executive vice president and chief operating officer.

Royal Crown announced it had filed its suit in Columbus because the soft drink, long linked in the South with a snack called a Moon Pie, was founded there 80 years ago, said Edmund A. Smason, of Smason Public Relations of Chicago, public relations counsel for Royal Crown.

If the proposed acquisitions are allowed, Pepsi and Coke combined would control about 80 percent of the approximately $27 billion soft drink industry.

Royal Crown Cola, which had 3.5 percent of the market in 1985, would then become the nation`s third largest soft drink producer. Shasta Beverages, which had 1.4 percent of the market, would become No. 7, according to the trade publication Beverage Industry.

Miami Beach financier Victor Posner has a stake in both soda companies: he is a majority stockholder in DWG Corp., of which Royal Crown is a subsidiary, and Posner has a second-hand ownership in Shasta Beverages. That company was purchased by Bunrup & Sims from Sarah Lee for between $54 and $74 million last November, according to analysts; purchase price was not announced.

Due to the transaction announced today, Posner now owns about 23 percent in Burnup and Sims, which in turn owns 40 percent of National Beverages; Burnup & Sims President Nick Caporella owns the other 60 percent of National Beverage.

Among the agencies under consideration for the Shasta account, according to ADWEEK, were Grey Advertising and D`Arcy Masius Benton & Bowles, New York City.

While the FTC goes to court to block the buyouts, Royal Crown isn`t keeping silent. The company, which lampooned Coke and Pepsi in Soviet Union ``fashion show`` TV ads earlier this year, admitted in its newspaper ads: ``We are a feisty company that loves competition and operates with the philosophy that the Cola Wars should be fought in the marketplace, not on Wall Street.``

National Beverages hasn`t joined with Royal Crown in opposing the takeovers because Shasta wouldn`t be affected to the same extent as Royal Crown, Goldwire said. National Beverages owns 11 bottling facilities nationwide, he pointed out, while Royal Crown mainly sells its concentrate to bottlers, some of them owned by Coca Cola and Pepsi.

Coke`s and Pepsi`s 80 percent share of the market should the acquisitions go through would not affect Shasta, Goldwire said. ``That would still leave 20 percent,`` he said.